Intel Swings Job Ax

Most of the job reductions will occur in management, marketing and information technology functions. Intel said it will incur about $200 million in severance costs.

"These actions, while difficult, are essential to Intel becoming a more agile and efficient company, not just for this year or the next, but for years to come," said CEO Paul Otellini in a press release.

Intel has struggled in recent months as increased competition from rival Advanced Micro Devices(AMD Quote - Cramer on AMD - Stock Picks) has resulted in an inventory glut and falling prices for its microprocessors. In July, Intel reported that its net income during the second quarter was down 57% from a year ago.

Intel's stock has been under pressure as well, with the company's shares off 28% from their 52-week high.

The company has recently unveiled a new family of dual-core microprocessors for desktops, laptops and servers featuring a brand new microarchitecture. Early reviews of the chips indicate that Intel has caught up with AMD in terms of performance and power consumption.

Still, Intel has said it expects sales for 2006 to be down 3% year over year, compared with initial projections that called for 6% to 9% growth.

In its announcement Tuesday, Intel said it was not updating its business outlook as the company is currently in its quiet period. Intel is slated to release its third-quarter financial results on Oct. 17.

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